Lang & Klain, PLC

 

Twitter

Facebook

 
 

Construction Law

Sullivan v. Pulte: Court Bars Negligence Claim Against Builder by Subsequent Home Buyer

Mike Thal

Subsequent purchasers are limited to recourse for construction defects under an implied warranty theory, which has a shorter limitations period than negligence claims.

In July 2015, the Court of Appeals made a favorable ruling for contractors in Sullivan v. Pulte when it held that a subsequent (i.e., non-original) homeowner cannot maintain a negligence claim against a homebuilder for construction defects.

The story began in 2003, when Mr. & Mrs. Sullivan bought a three-year-old Pulte home from the original owner. Six years later, in 2009, the Sullivans discovered defects in the retaining wall and asked Pulte to repair them. Pulte declined to make the repairs, claiming that it was not responsible for defects in a home of that age. The Sullivans sued Pulte for damages for fraud and misrepresentation, for breaches of implied warranty, and for negligence.

 

Negligence Claim Against Builder

This article appeared in the November 2015 issue of "The Construction Advisor" published by Lang & Klain, P.C.


Free Subscription to the Construction Advisor


View the Construction Advisor index

The trial judge dismissed the Sullivans’ lawsuit, ruling that:

  • because the Sullivans never had a contract or dealt directly with Pulte, they had no claim for fraud or misrepresentation;

  • the eight-year limit imposed by Arizona’s statute of repose had expired, depriving the Sullivans of their implied warranty claim; and

  • Arizona’s economic loss rule barred the Sullivans’ negligence claim.

Appeal

The Sullivans appealed, and the Arizona Court of Appeals upheld the dismissal of their fraud and implied warranty claims.

However, the Court ruled that, because the Sullivans did not have a contract with Pulte, the economic loss rule did not bar the Sullivans’ negligence claim. Pulte appealed that issue to the Arizona Supreme Court, which agreed with the Court of Appeals and remanded the negligence claim to Superior Court.

Back in Superior Court, Pulte again moved to dismiss the Sullivans’ negligence claim, this time arguing that Pulte owed no duty of care to a subsequent home purchaser (such as the Sullivans) to protect them from economic harm. Again the trial court dismissed the Sullivans’ negligence claim, and again they appealed.

In their second appeal, the Sullivans argued that Pulte’s duty of care arose from building codes and from the statutes that empower the Arizona Registrar of Contractors to discipline a contractor for workmanship violations. The Court of Appeals did not buy that argument, holding that those regulations were too broad to impose a specific duty of care on builders, and upheld the trial court’s dismissal of the negligence claim.

In the end, after two trial court proceedings and three appeals over five years, the net result was no different than the trial court’s original dismissal of all of the Sullivans’ claims (although the negligence claim was dismissed, not based on the economic loss rule, but because Pulte owed no duty of care to the Sullivans).

A Win for Contractors

The outcome is good news for builders and other contractors, because negligence claims are governed by the “discovery rule,” which allows a claimant to file suit within two years of discovery of the defect. Had the courts allowed the discovery rule to apply to claims such as the Sullivans’, a non-original homeowner would be able to sue over a defect even if that defect was discovered decades after construction.

Under the Sullivan ruling, subsequent purchasers are now limited to recourse for construction defect claims under an implied warranty theory, which has a limitations period of eight to nine years, regardless of when the alleged defect is discovered. Keep in mind, however, that claims for non-economic injury (i.e., injury to property or person) are not covered by this limitation and can still be the subject of negligence or other tort claims.